What is a Wholesale Dealer Bond?
In several states, auto dealers operating wholesale businesses are required to hold a valid license to do business. Licensing requirements vary, but it is likely that a wholesale dealer bond is a necessary part of the process. A wholesale dealer bond is a type of license bond that ensures a wholesale auto dealer will comply with state laws when working with customers. If a dealer fails to act according to regulations, a customer has the opportunity to file a claim against a wholesale dealer bond for compensation, up to the limit of the bond.
A wholesale dealer bond operates like other surety bonds, creating a contract between three parties. The obligee is the state licensing authority requiring a bond to be posted, while the principal is the wholesale auto dealer that must post a bond. The surety company provides the bond to the principal and extends a credit line to cover claims. The wholesale dealer is responsible for repaying any legitimate claim amounts covered by the bond.
What Does a Wholesale Dealer Bond Cost?
One of the factors used to determine the price of a wholesale dealer bond is the total bond amount required by the state. This varies depending on state regulations, ranging from $10,000 to $150,000. Fortunately, wholesale dealers are not responsible for paying the total bond amount. Only a small percentage of the total is charged as the bond premium, typically between 1 and 10% of the bond.
The bond premium you pay as a wholesale dealer depends on your personal credit history as well as your business financials. A low credit score and a credit history that includes negative marks like bankruptcy or civil judgment may lead the surety company to believe you are a high-risk bondholder. Your wholesale dealer bond premium is higher to offset this risk.
How Do I Get a Wholesale Dealer Bond?
You can submit a short online application to start the process of securing a wholesale dealer bond. The surety company provides you with a bond quote after reviewing your application details.
Frequently Asked Questions
Yes, it’s possible, but bad credit usually results in higher rates.
Yes. We provide the lowest rates possible as a result of the large volume of bonds we write.
You must contact us immediately, as we have a team of claim specialists here to find a resolution for you. Keep in mind, it is crucial that you work with an expert in the surety industry. Learn more about how to ensure you choose the proper bond company.